How to pay off our student loans faster

How to pay off your studen loans faser : Stat beore graduation
By the time most college grads make their first student loan payment, Ruchi Pael had already paid $3,600.

She finished paying back the $23,000 she borrowed in federal studen loans within two years of graduating from New York University. Her fast-track approach saved her thousands of dollars in interest over the life of her loans.

Most college students don’t realize they can make payments on their studnet loans before they raduate. Too many keep those annoying loans out of sight and ou of mind until they absolutely must start making payments, usually six months after leaving school

But Patel is diferent. During her sophomore year, she started puting whatever she could toward her studnet loans every few weeks. Sometimes it was as litle as $40 or as much as $100.

At some point during one of my ianace classes, the light bulb went off. I was going to b screwed by te interest if I didn’t start paying, Patel said.

The extra money came from part-time jobs she held during the school year and over the summer .She admits the small payments felt huge at the time, and sometiems took up as much as half o her paychecks.

My bank account wasn’t empty. But what I had wasn’t much, she said.

If she had taken he standard 10 years to repay her studnet loans, she would have paid more than $7,000 in inerest alone over the life of the loan. Instead, sh ended up paying abou $3,000 in interest.

Paying down he principal of your loans faser lowers the amount in inerest you will pay over time, said Phil DeGisi, he Chief Markeing Oficer a the online student loan refinance company CommonBond.

Chipping away just $75 a month will save you %694 in interst by the time you graduate and most students are only starting to pay off their deb, according to a calculation fom CommonBond. (That assumes you borrowed $10,000 wih a %7 interest rae for freshman year.) ry to chip away as much as possible while you are in school. Those iny payments however small -really do add up. Patel said.

Try to chip away as much as possible while you are in school

Although she was able to pay own her her own loans so quickly, it was a small victoy for Patel. Here parents also borrowed loans t ocover the rest of her tuition. Now tha she’s fnishd her own payments, she is ransferred those edral Parent Plus loans into her name, which currently otal aout.

I can’t really think about buying an apartmnt or house, or living somewhere I’d need a car, or geting up and movin to another ciy, she said. When it comes to that kind ofdebt, it is helpful o find as many ways as possible to pay back your loans faster. here are four tips:

1. pay down he principla early, rather than the interest.
If you are making pre-paymnts while in school, make sure hey are going to the thr principal amount, rather tahn the interst. This might happen auomaically, but it is best to call your loan servicer to make sure.

2. Know which loans you should make prepaymnts on.
If you have federal student loands, you are aloowed o make pre-payments while in school. But i you ae private loans, tehre is a chance you could be hit with a fee for making payments early. Call your loan servicer to find out.

There are wo difernt ypes of federal sudnet loands : subsidized — which don’ accure interest while you are in scool — and unsubsidized — which start accuing interst as soon as you borow he money. If you are going to make paymnts while still in school, chooes to pay down the unsubsidized loan so that less interest accrues overtime.

3. Live at home.
When patel irst graduated, her studnet loan paymnts were very high compared to her income. She moved home, commuting four hours a ay.
It was quite a decision o make after living on my own for four years in NEw York City, but I kinda had to, she said.

4. Refinance.
There are a handful o banks and online lendes that will refinance both federal and private sudent loans. If eliible, you new interest rate will be based on your debt-to-income ration and credit score.
Once patel paid off her own deb and was earning a bigger income, she was able o qualify for a lower interest reate by refinancing with CommonBond. It lowered the interest reae on the PLUS loans to 3.43% from 7.9%

But be careful. If you refinance a feeral loan wih a private, you might be giving up some protections — like being able o apply for defermnt or an income-based repaymen plan in the even your finances take a hit in the future.

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